Introduction

Starting a business in Turkey as a foreign national presents a unique set of legal and regulatory challenges. Governed by Turkish Commercial Code No. 6102, foreign investors must follow specific company formation rules while navigating the bureaucratic processes. This guide provides insight into the key legal challenges and outlines the company formation procedures for foreigners in Turkey.

Limited Liability Company (LLC):

• The Limited Liability Company (LLC) is the most preferred structure for foreign investors. It requires a minimum capital of 10,000 TRY and can be entirely foreign-owned.
• This structure provides protection by limiting shareholders’ liabilities to their contributions, making it an attractive option for foreign business owners.

• A Joint Stock Company (JSC) requires a higher minimum capital of 50,000 TRY and is more suitable for large-scale operations. Foreign investors can own shares in a JSC, with regulations offering flexibility in share transfer.

• For foreign companies that want to extend their operations into Turkey without forming a separate legal entity, a branch office is an option. It’s tied to the parent company, and all liabilities remain with the headquarters.

• Liaison offices serve as non-commercial entities, focusing on activities such as market research or networking. Liaison offices cannot generate revenue and are exempt from corporate tax.

Reserve a Company Name:

• Start by reserving a unique company name through the Turkish Trade Registry. The name must adhere to the guidelines set by the Turkish Commercial Code.

• Draft the Articles of Association, outlining the company’s structure, capital, and scope of operations. This document must be notarized and approved by the Trade Registry.

• For LLCs, at least 25% of the capital must be deposited into a Turkish bank account. For JSCs, this rises to a more significant initial deposit before company registration.

• After the company’s Articles of Association are submitted, the Turkish Trade Registry Office will issue the registration. Simultaneously, a tax identification number is obtained from the local tax office.

Work Permits for Foreign Entrepreneurs:

• Foreign entrepreneurs who wish to actively work in their Turkish companies need a valid work permit. Navigating the work permit process can be challenging due to administrative hurdles and sector-specific restrictions.

• While most sectors are open to foreign investors, certain industries like media, defense, and mining have restrictions or require additional approvals for foreign ownership.

• Language barriers and unfamiliarity with Turkish regulations can complicate business operations for foreign nationals. Hiring a local legal expert is essential to ensure compliance with Turkish laws and regulations.

Free Zones and Tax Incentives:

• Foreign businesses operating in Free Zones benefit from tax exemptions and reduced regulatory burdens. These zones offer advantages for import/export businesses and high-tech industries.

• The Turkish government’s Investment Incentive Program offers tax reductions, VAT exemptions, and financial support for infrastructure projects. This program is aimed at attracting foreign investment into sectors like technology, energy, and manufacturing.

• Foreign startups in the technology sector can take advantage of Technology Development Zones, which provide tax incentives and relaxed administrative processes for R&D-based businesses.

Streamlined Digital Registration:

• In 2024, Turkey introduced a streamlined digital company registration platform. This allows foreign investors to register their companies and submit necessary documents online, significantly reducing processing times.

• Turkey’s focus on foreign startups has increased, particularly in sectors like fintech, AI, and green energy. New government programs offer financial support, mentoring, and tax incentives to encourage foreign entrepreneurs.

Navigating the legal landscape for starting a business in Turkey as a foreign national can be complex. From choosing the right company structure to understanding regulatory requirements, foreign entrepreneurs must stay informed and work closely with legal experts. By leveraging Turkey’s investment incentives and staying updated on legal changes, foreign investors can establish successful businesses in Turkey.